Capitalising sales commissions for events under the costs to obtain a contract rules

The exhibition sales team closes a strong September. Commission is calculated on booked value, approved in October, and paid with the October payroll. The show it relates to opens the following June.

Capitalising sales commissions for events is the question of whether that money is an October expense or a June one, and for most shows the answer turns out to be simpler than the argument suggests. It is worth knowing why it is simple, because the two cases where it stops being simple are cases most portfolios have.

The commission cheque goes out ten months before the revenue

Take the June exhibition. Space revenue of 5.6 million, commission at 4 per cent of booked value, which is 224,000. Sponsorship of 1.3 million at 6 per cent adds 78,000. Total commission on the edition is 302,000.

None of that revenue is recognised until the show stages. Emerald Holding's Form 10-K for the year ended 31 December 2025, filed in March 2026, describes the pattern in a single line: exhibitors contract for their booth space and sponsorships up to a year in advance of the trade show, and revenue is recognised in the period the trade show occurs.

So there is a gap of up to twelve months between paying the person who sold the stand and earning the money they sold. The accounting question is what sits on the balance sheet during that gap, and whether anything has to.

What the standard calls an incremental cost of obtaining a contract

IFRS 15, issued by the IFRS Foundation in 2014, deals with this in three paragraphs and they are short enough to read in full.

Paragraph 91 says an entity "shall recognise as an asset the incremental costs of obtaining a contract with a customer if the entity expects to recover those costs".

Paragraph 92 defines the term: "The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, a sales commission)."

The parenthetical is the standard naming your exact case. A sales commission is the textbook incremental cost, and the default treatment is an asset rather than an expense.

Paragraph 94 then provides the exit: "As a practical expedient, an entity may recognise the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognised is one year or less."

Three sentences, and between them they decide the treatment of every commission an event business pays.

Which commissions actually qualify?

The word doing the work is incremental, and it excludes more of the sales cost base than people expect.

A commission payable only on a signed booking qualifies. A commission payable on a pipeline target, or a quarterly bonus paid whether or not any specific contract closed, does not, because it would have been incurred anyway. Base salary does not qualify. The sales director's salary does not qualify. Travel to a pitch does not qualify even when the pitch succeeded, because the flight was booked before the outcome was known and would have been paid on a loss.

Two cases sit on the boundary and are worth deciding in writing.

The first is a commission paid on a renewal that a salesperson processed rather than won. If the rebooking form was signed on the show floor with no sales effort and the commission is contractually due anyway, it is still incremental to that contract, because no contract means no payment. It qualifies.

The second is employer social security and pension contributions on the commission itself. Those are incremental too, and leaving them out understates the asset by whatever your on-cost percentage is. On 302,000 of commission at a 14 per cent on-cost, that is another 42,280.

Does your show sit inside the one year expedient?

For a single-edition annual show sold across the nine or ten months before it stages, yes, comfortably. The asset would exist from the booking date to show close, which is under a year, so paragraph 94 lets you expense the commission as incurred and stop thinking about it.

Two situations fall outside, and both are common enough to check for.

A biennial show is the clear one. Sales open twenty months before the edition, a large exhibitor signs in October 2025 for a show in June 2027, and the commission is paid in November 2025. The amortisation period is nineteen months, so the expedient is unavailable and the cost has to be carried as an asset and released when the show stages. On a biennial with 5.6 million of space and 4 per cent commission, that is 224,000 sitting on the balance sheet for over a year.

The less obvious one is on-floor rebooking for the edition after next. Some shows sell two cycles ahead to anchor tenants, and a commission paid in June 2026 against a June 2028 show is a two-year asset by the same logic.

There is a third case that catches organisers with subscription-style products alongside the show, where the amortisation period is arguably the expected customer life rather than the contract term. Emerald's 10-K applies exactly that logic on the other side of the transaction, deferring implementation fees for its subscription software over an expected customer life of four years. Where a first-year commission effectively buys a multi-year relationship, the period to amortise over is a judgement rather than a contract date.

Working the December year end through

The expedient makes the accounting simpler and it does not make the reporting neutral, which is the part worth modelling before you adopt it.

Take the same June show and a 31 December financial year end. Suppose 38 per cent of the space is booked by the end of December and 30 per cent of the sponsorship. Commission incurred in the earlier year is 38 per cent of 224,000, which is 85,120, plus 30 per cent of 78,000, which is 23,400. That is 108,520 of cost falling into a year that will recognise none of the related revenue.

On a show making 2.8 million, 108,520 is 3.9 per cent of the profit, moved from one year into another by a choice of accounting policy rather than by anything that happened commercially. Capitalise instead and the 108,520 sits as an asset at 31 December and unwinds in June, matching cost to revenue.

Both treatments are permitted. The expedient is easier and it makes the December result look worse in a growing show and better in a shrinking one, because the commission moves with bookings while the revenue moves with editions. Where a show is growing quickly, the drag compounds: a 20 per cent larger book at the same point next year carries 21,704 more commission into a year with no offsetting revenue.

That mismatch is a smaller version of the shape described in the cash profile of an annual show, where money leaves the business long before it arrives, and it is one reason the commission line deserves a named row in the event profit and loss structure rather than being buried inside sales costs.

The recoverability test nobody runs until a show is cancelled

Paragraph 91 has a condition attached to it: the asset is recognised only where the entity expects to recover the costs. That test is trivially met in a normal year and it is the first thing to fail in an abnormal one.

If a show is cancelled and the space fees are refunded, the commission asset has nothing to be recovered against, and it goes to the income statement immediately. An organiser carrying 224,000 of capitalised commission on a biennial edition that gets pulled takes the whole charge in the period the decision is made, on top of everything else happening that quarter.

The same applies in miniature to an individual exhibitor default. A stand booked in October, commission paid in November, exhibitor insolvent in March: the receivable is provided against and the commission asset, if you carried one, is impaired with it. Where the commission is clawed back from the salesperson under the commission scheme, the recoverable amount is the net figure, which is a good reason to read your own commission scheme before setting the policy.

Where this stops

The expedient makes the treatment easy and it does not make the number visible. A commission expensed as incurred disappears into selling costs and stops being traceable to the contracts it bought, which means nobody can answer the obvious commercial question of what you paid to acquire a square foot of booked space.

The related limit is that none of this touches the incentive design. Whether commission is paid on booked value or on collected cash, whether it is clawed back on cancellation, and whether it rewards renewal at the same rate as new business are decisions that change behaviour and change the cash profile, and the accounting standard is silent on all three. A policy that capitalises correctly and pays 4 per cent on a discounted booking is compliant and expensive. Discount allocation across a bundled deal, and therefore the base the commission is calculated on, is dealt with in sponsorship revenue accounting.

This week, take your commission scheme and mark each element as payable only on a won contract or payable regardless. Then check the longest gap between a commission payment date and the show it relates to. If any of them exceeds twelve months, you have a capitalisation question rather than a policy note, and it is better found now than during the event finance close.